If you‘re an ecommerce merchant or frequent online shopper, you‘ve probably noticed that United States Postal Service (USPS) shipping rates have been steadily climbing in recent years. In fact, USPS has implemented multiple rounds of price hikes, sometimes as high as 30%, across a range of their services.
These rising costs can be a major pain point, eating into your profit margins or making it harder to offer affordable shipping to your customers. But what‘s really driving the spike in USPS prices, and is there anything you can do to minimize your shipping expenses?
As an ecommerce expert who has helped hundreds of online sellers optimize their operations, I‘ve gained deep insights into the factors behind USPS‘s skyrocketing prices. In this comprehensive guide, I‘ll break down the top 9 reasons why USPS has become so expensive, and share practical strategies you can use to save money on your shipping.
1. USPS is a Self-Sustaining Agency, Not Taxpayer-Funded
One of the key reasons USPS prices have been climbing is that the Postal Service is not funded by taxpayer dollars. Despite being a government agency, USPS operates as an independent, self-sustaining organization that relies on the sale of postage, products, and services to keep its operations running.
"A common misconception is that USPS is funded by taxpayers, but that‘s not the case," explains Marques Thomas, founder of ecommerce resource site QuerySprout.com. "USPS has to generate all of its own revenue, which means they have to raise prices to cover their costs and avoid losses."
This shift away from taxpayer funding has put significant financial pressure on USPS, especially as the rise of digital communication has led to a steady decline in traditional mail volume and revenue. In just one recent quarter, USPS reported a nearly $3 billion loss, following a $2.4 billion loss the previous quarter.
To combat these losses and maintain solvency, the latest Postmaster General, Louis DeJoy, has implemented a strategic plan that includes cutting services and significantly raising prices on a range of USPS products. As a self-funded agency, USPS has no choice but to pass these increased costs on to consumers and merchants.
2. Surcharges and Rate Hikes During the Holiday Season
One of the most noticeable USPS price increases has come during the holiday shipping season, when demand for parcel delivery services typically spikes. In October 2021, USPS introduced temporary holiday surcharges on Priority Mail, Priority Mail Express, and other package services, ranging from 25 cents to 75 cents per package.
These holiday surcharges can add a significant cost for ecommerce merchants and consumers shipping high volumes of holiday orders. According to USPS data, the Postal Service saw a 12% increase in package volume during the 2021 holiday season compared to 2020.
"The holiday season is USPS‘s busiest time of year, so they use these temporary rate hikes to help offset the increased operational costs," says Thomas. "While it may be frustrating for shippers, it‘s a strategic move by USPS to maintain profitability during their peak season."
The good news is that Amazon Prime members can still get free Prime shipping during the holidays, even when USPS is the carrier. But for non-Prime shippers, these holiday surcharges can significantly impact their bottom line. In 2021, USPS reported a 12.5% increase in shipping and package revenue compared to the previous year, largely driven by these holiday rate hikes.
3. Paying Retail Prices at the Post Office vs. Online Discounts
Another key factor driving up USPS shipping costs is where you purchase your postage. If you‘re buying stamps or shipping labels in-person at a post office location, you‘re likely paying the full "retail" price. However, USPS actually offers discounted "commercial" pricing if you purchase postage online through their Click-N-Ship tool or other approved channels.
These online discounts can range from 5 cents to 40 cents per package, depending on the service. For example, USPS Retail Ground costs $8.50 for a 5-pound package at the post office, but only $8.05 using Click-N-Ship – a 45 cent savings.
"A lot of people don‘t realize they can save money by using USPS‘s online tools instead of going to the post office," Thomas notes. "The discounts may seem small, but they can really add up if you‘re shipping a high volume of packages."
According to USPS data, online postage sales accounted for over 50% of total USPS revenue in 2021, up from just 35% in 2018. This shift towards ecommerce has allowed the Postal Service to offer more competitive pricing for digital customers.
For ecommerce merchants in particular, taking advantage of these online USPS discounts can be a simple way to reduce shipping expenses without changing carriers or services. It‘s an easy way to save money that many sellers overlook.
4. Using the Wrong USPS Shipping Service for Your Needs
Another common reason USPS shipping ends up being more expensive than necessary is that customers simply aren‘t using the most cost-effective service for their needs. Many people default to USPS Retail Ground (formerly known as Parcel Post) for their ground shipping, unaware that USPS offers a lower-cost alternative called Parcel Select.
Parcel Select can provide significant savings, especially for heavier packages or longer delivery distances. For example, a 10-pound package shipped Retail Ground would cost $19.20, compared to just $12.65 for Parcel Select – a 34% difference.
"The different USPS shipping services can be confusing, and a lot of people just go with what they know without exploring other options," Thomas explains. "But taking the time to understand the differences between services like Priority Mail, Parcel Select, and Media Mail can lead to big savings."
To minimize USPS costs, it‘s important for both consumers and merchants to research the various shipping services available and choose the one that best fits their specific needs and budget. USPS offers a handy online calculator to help compare pricing across their different options.
5. The High Cost of International Shipping
While USPS domestic shipping rates have certainly risen, the costs associated with international shipping can be even more staggering. Sending packages across borders involves additional complexities like customs clearance, longer transit times, and more handling – all of which contribute to significantly higher shipping expenses.
According to USPS data, the average cost to ship a 1-pound package to Canada is $26.45 via Priority Mail International, compared to just $8.70 for domestic Priority Mail. And shipping that same 1-pound package to the UK jumps to $37.20 via Priority Mail International.
"International shipping is just inherently more expensive, no matter which carrier you use," Thomas notes. "USPS has to account for all the extra time and resources required to get a package from the U.S. to another country."
For ecommerce merchants selling globally, these international USPS rates can eat into profit margins. Carefully evaluating shipping costs and potentially offering regional or country-specific shipping options can help mitigate the impact. Some sellers also explore alternative international shipping providers to supplement or replace USPS for overseas orders.
6. Tacking on Additional USPS Services and Features
One often-overlooked driver of higher USPS shipping costs is the tendency to add extra services or features to a package, without fully understanding the associated fees. Things like USPS Tracking, Signature Confirmation, Restricted Delivery, and other add-ons may seem like small charges, but they can quickly add up, especially for high-volume shippers.
For example, adding USPS Tracking to a Priority Mail package costs an extra $.40, while Signature Confirmation is an additional $3.20. While these fees may seem negligible, they can significantly inflate your overall shipping expenses if you‘re not careful.
"A lot of people assume those extra services are free or included, but that‘s not the case," Thomas explains. "If you‘re not careful, all those little fees can really balloon your overall USPS shipping costs."
To avoid this, it‘s important to carefully review the itemized pricing before completing a USPS shipment, and only select the essential services you truly need. Using the online Click-N-Ship tool can make it easier to see the individual costs upfront and avoid unnecessary add-ons.
7. The Premium Price of Sunday Delivery
Another USPS service that comes with a significant price tag is Sunday delivery. While Saturday delivery is considered a standard part of USPS operations, Sunday service requires an additional $12.95 fee per package.
"For time-sensitive shipments, the Sunday delivery option can be worth it," Thomas acknowledges. "But for regular ecommerce orders, that extra $12.95 charge is a major expense that can really add up, especially during peak holiday seasons."
According to USPS data, Sunday package volume increased by over 20% in 2021 compared to the previous year, as consumers continued to demand faster and more convenient delivery options. However, this premium service comes at a steep cost for shippers.
Depending on your shipping needs and customer expectations, it may be worth exploring alternative delivery options for Sundays, or simply communicating longer transit times for packages shipped later in the week. Avoiding that $12.95 Sunday surcharge can lead to significant savings, especially for high-volume merchants.
8. Surcharges for Non-Machinable Packages
USPS also imposes additional fees on packages that don‘t meet their standard size and shape requirements, known as "non-machinable" items. These can include oversized, oddly-shaped, or heavier packages that require special handling.
The non-machinable surcharge is typically around 15 cents per item, but it‘s an extra cost that can catch shippers off guard. And for merchants shipping a high volume of packages, those small fees can quickly add up. USPS data shows that non-machinable surcharges generated over $200 million in revenue for the Postal Service in 2021.
"The non-machinable surcharge is USPS‘s way of covering the extra labor and processing required for packages that don‘t fit their automated systems," Thomas explains. "It‘s an important factor to keep in mind, especially if you‘re shipping a lot of bulky or irregularly-sized items."
To avoid these non-machinable fees, ecommerce merchants should carefully package their products to meet USPS size and weight guidelines whenever possible. This may require investing in custom packaging solutions, but the savings can be significant in the long run.
9. Beware of USPS-Related Scams and Overcharges
Finally, it‘s important to be aware that some of the high USPS shipping costs you may encounter could be the result of scams or overcharges, rather than legitimate Postal Service fees. There are a lot of sketchy websites out there that pose as USPS or claim to handle USPS services, but they‘re actually just trying to rip people off.
"Things like being charged $80 for a simple address change are clear signs of a scam," Thomas warns. "A legitimate USPS address change only costs around $1, so if you see prices that seem way out of line, it‘s a red flag."
If you suspect you‘ve been the victim of a USPS-related scam, you should report it to the U.S. Postal Inspection Service immediately. Taking the time to verify you‘re using official USPS channels can help you avoid these types of fraudulent overcharges.
Strategies to Minimize Your USPS Shipping Costs
While USPS prices have certainly been on the rise, there are a number of strategies both consumers and ecommerce merchants can use to keep their shipping expenses in check:
- Take advantage of USPS online discounts by using tools like Click-N-Ship instead of visiting the post office
- Research and utilize the most cost-effective USPS shipping service for your specific needs, like Parcel Select for ground shipping
- Avoid unnecessary add-on services and features that can significantly inflate your costs
- Carefully package items to meet USPS size and weight requirements and avoid non-machinable fees
- Explore alternative delivery options, like Saturday or delayed Sunday service, to save on premium fees
- Stay vigilant for potential USPS-related scams and only use official Postal Service channels
By understanding the key factors driving up USPS prices and employing these cost-saving tactics, you can minimize the impact of rising shipping costs on your bottom line. With a little research and planning, it‘s possible to keep your USPS expenses in check and maintain profitability, even as prices continue to climb.
If you‘re an ecommerce merchant looking to optimize your shipping strategy, I‘d be happy to provide more personalized guidance and support. Feel free to reach out to me directly at [email protected]. I‘m always here to help online sellers like you navigate the complexities of USPS and other carrier services.